Does the Devon Alpha Fund charge a performance fee?
Yes — in addition to its annual fund charge.
Performance fee paid last period
0.54%
of NAV
Annual fund charge (on top)
1.30%
p.a. — the base ongoing cost
Verbatim from the Product Disclosure Statement
The first 1% of gross return above the hurdle rate of return up to 13% per annum, then 15% of the gross return thereafter. There is a cap on the performance fee of 3%. Hurdle rate: 12% p.a. Subject to high water mark. Calculated and accrued in the daily unit price and paid annually on 31 March each year.
How to read a performance fee
A performance fee is paid only when the fund's return exceeds a hurdle benchmark — often the OCR plus a margin, or a market index. The fee is usually a percentage share of returns above the hurdle (commonly in the low double-digits) and is subject to a "high-water mark" so the same gain can't be charged twice. Many NZ MIS funds also impose a hard cap as a percentage of NAV so the perf fee can't run unbounded in a high-return year.
Performance fees vary year-to-year — a fund can show a high perf-fee number one period and zero the next, depending on whether it cleared its hurdle. The structural questions worth answering before investing are: What's the hurdle? (cash-rate hurdles are easier to clear than index hurdles) Is the high-water mark perpetual or annual? (perpetual = stronger investor protection) and Is there a cap? (cap = downside-bounded fee).